Friday 31 July 2009 13.13 EDT
First published on Friday 31 July 2009 13.13 EDT

The downturn in America's economy eased in the second quarter, official figures revealed today, supporting President Obama's claim that the US has "stepped away from the precipice".

The US department of commerce reported that GDP contracted by 1% at an annual rate between April and June, less than the 1.5% decline forecast by Wall Street. It was a marked improvement on the first quarter, when the government now says there was a 6.4% contraction – the biggest decline since 1982 – not 5.5% as previously thought.

"The data also support our view that the US economy should return to growth in the current quarter," said Gabriel Stein, of Lombard Street Research.

Optimism that the worst of the downturn may be over was tempered by sharp downward revisions to official estimates of what happened to the economy last year, however. During 2008 as a whole, as the financial turmoil that began in summer 2007 ripped through the US economy, growth is now calculated to have been just 0.4%, much worse than the previously reported 1.1%. Economists were also concerned that consumer spending fell by 1.2% in the second quarter, against a 0.6% rise in the first three months of the year, underlining fears of a "double dip."

"The details don't necessarily look great," said Carl Lantz at Credit Suisse in New York. "The consumption number especially was weaker than people were looking for – this was a very consumer-led downturn."

In Britain, the Treasury's hopes that it will escape from the credit crunch without plunging into a public debt crisis were boosted by ratings agency Fitch, which affirmed its AAA rating for the UK gilts, and predicted that the government would eventually be able to claw back two-thirds of the cost of bailing out the banking sector.